L3Harris Technologies (LHX) has 'favorable long-term growth outlook' - Baird

L3Harris Technologies (NYSE: LHX) was raised to Outperform from Neutral, with the price target increased to $219 from $198 per share at Baird on Tuesday.

Analyst Peter Arment said the downgrade and price target cut reflect the significant underperformance of the LHX stock year-to-date (down 17%).

He also noted that two major M&A deals have closed in 2023 and defense funding is on the path to increase globally, which sets up improving fundamentals for LHX in 2024.

LHX has a "favorable long-term growth outlook," said Arment. "MSD growth is a good baseline assumption for 2024+, with exposure to missiles/munitions via AJRD providing upside plus 40% of total revenues are short-cycle so as funding improves along with operational tempo overall growth should benefit."

"While margin compression narrative has been a concern, we see improving fundamentals for growth, contract execution (less negative EACs) plus deleveraging that should drive favorable bottom-line and FCF growth." the analyst concluded.

By Sam Boughedda

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